The loan documentation is a key document for ensuring the project sponsor applies the Equator Principles beyond the signing of the loan agreement, right through the construction and operation, and where appropriate the decommissioning, phases of the project.

Failure to comply with the loan covenants may prevent or delay the project sponsor being able to drawdown on the loan, or even an event of default whereby, the lenders are entitles to cancel the loan, and all monies lend are immediately payable by the borrower.

The work is being undertaken by the Chinese Academy for Environmental Planning (CAEP), in cooperation with the Global Environmental Institute (GEI) and the University of International Business and Economics. The first draft is now being discussed, the GEI said.

A report released by the CAEP last week said the country lacked comprehensive environmental protection policies in its overseas projects, although investment had been expanding.

Statistics show that between 2002 and 2006, China’s overseas non-financial direct investment grew by 60 percent annually. By the end of 2006, 5,000 Chinese companies had set up nearly 10,000 directly invested firms and invested $90.6 billion in 172 countries.

China’s overseas investment and aid mainly focuses on exploring oil and other resources, processing, manufacturing, and construction in African and Southeast Asian countries. Without proper management, such projects are likely to cause environmental problems, the report said.

In April, several companies, including China Mobile, Haier Group, and China International Marine Containers, joined “Caring for Climate”, a voluntary UN initiative to combat global climate change. Liu Meng, director of UN Global Compact China Office, told China Daily earlier that these companies’ participation suggests that China’s business sector is catching up with its international counterparts on climate issues.

China National Petroleum Corporation, the country’s largest oil producer, has pledged to stick to stringent environmental requirements before deciding on overseas projects.

Currently, only four banks in China have either formulated independent environmental standards for financing, or have joined the United Nations Environment Program Finance Initiative to reduce environmental risks.

The new EBRD Public information policy (PIP) was approved on the 12th May. It sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. At the same time, the PIP establishes clear lines of demarcation to distinguish information which is made publicly available (either on a routine basis or upon request) from information which may not be disclosed on the grounds of being confidential. This is to ensure that mutual trust is maintained between the Bank, its business clients and other partners.

A new IFC report “Banking on Sustainability,” has been released. It provides practical examples of 14 financial institutions in 12 countries that have taken concrete steps to integrate sustainability into their policies, practices, products, and services.

“While detailing the evidence of potential benefits for banks in integrating sustainability into their business strategy, the report reveals a dramatic shift in banks’ awareness of these benefits,” said Rachel Kyte, IFC Director of Environment and Social Development.

In a 2005 IFC survey, 86 percent of 120 financial institutions interviewed reported positive changes as a result of steps they had taken to integrate social and environmental issues in their business.The report shows evidence of the potential benefits of adopting sustainability as a business strategy. It also shows a dramatic shift in banks’ awareness of these benefits. Banks can tap vast benefits by reassessing their business practices and engaging in sustainability-oriented risk management and product development.

It is notoriously difficult to quantify the financial benefits of adopting sustainable business practices, however this report demonstrates some clear business benefits from adopting and integrating environmental and social considerations into core business strategies.

March 13, 2007- The International Finance Corporation (IFC) announced today the release of a new IFC publication, “ILO Convention 169 and the Private Sector: Questions and Answers for IFC Clients.”

The ILO Convention 169 and the Private Sector (PDF, 90kb) publication is intended as a practical guide for IFC clients who operate in countries that have ratified Convention 169 on Indigenous and Tribal Peoples. It is the first guidance of its kind written for the private sector in relation to Convention 169 which is directed at governments. IFC prepared this publication, in close consultation with the ILO, in response to the experiences that IFC has had in recent years with private investments affecting indigenous peoples and their lands in Latin America.

IFC hopes this publication will help to raise awareness about the Convention and its possible implications for private sector companies, and provide added clarity and guidance for IFC clients. The publication should be read in conjunction with IFC’s Performance Standard on Indigenous Peoples.

London, 16 November: Ethical fund managers should favour companies that maintain high standards of working conditions in their supply chains, according to a survey of investors released this week.

UK investment management company Standard Life polled close to 1,200 of its ethical investors, asking them to rank the issues of most importance to them.

Workers’ conditions topped the rankings, which also revealed that the environment was a major concern among investors. The provision of pollution control products or services, and the development and use renewable energy, were placed second and third in terms of importance.

Standard Life Investments manages approximately £130 billion ($245 billion) of assets, £425 million of which is ethically invested. It uses the survey to adapt its investment policy in line with investors’ views on issues such as community involvement, employment policies, corporate governance, alcohol, gambling and animal testing.

The investors said fund managers should avoid investing in companies and countries with poor human rights records, companies involved in the arms trade, and those that are responsible for clearing tropical forests.

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Risk in Project Finance

This site considers current news, key issues, articles, and new regulatory and guidance information from different viewpoints, including banks, legal firms, project sponsors, consultancies and NGOs in order to provide a wide spectrum of opinions.
In order to demonstrate why risk management so important, the site provides information and conflicting opinions from those who support and oppose the finance of key project. It also includes an evaluation of the different views on the various management techniques.

Financial Institutions

The various approaches and guidelines have provided invaluable risk management tools for Financial Institutions, and while there will always be critics of some of the finer details, the overall benefits have been overwhelming and far reaching. The banks have shown a highly impressive degree of co-operation and innovation in their approach to environmental and social risk management.